The Transcon Wars: The Ultimate Airline Battleground

MIAMI — When New York based discount carrier JetBlue Airways revealed the details of its hotly anticipated premium offering on the Airbus A321 and Atlanta based full service carrier Delta Air Lines unveiled the details for its new flat-bed BusinessElite cabin on its fleet of Boeing 757-200 aircraft early last week, it marked just the latest piece of sizzling news surrounding the New York JFK to Los Angeles (LAX) and San Francisco (SFO) trans-continental markets.

The markets began as ones of innovation. They were after all the site of the first non-stop transcontinental long-haul domestic flights in 1953 and regularly scheduled domestic jet service in the U.S. beginning in January 1959. Both routes were pioneered by American Airlines.

The markets, which as recently as 2003 were the domain of a duopoly of stodgy premium products for American and United that hadn’t been updated in more than 10 years, have evolved into the fiercest battleground in the domestic US market today; the site of what we’re calling – the Transcon Wars.

As with the popular movie franchise Star Wars, the Transcon War markets are fraught with competition – featuring several head-to-head duels and myriad underlying subplots for the 5 primary competing carriers; JetBlue, Delta, United Airlines, American Airlines, and Virgin America. The action won’t really heat up until 2014, when many of the new products on the route are introduced. But in the interim, given the spate of recent product announcements on the trans-continental routes between New York JFK and Los Angeles/San Francisco, we thought we’d break down the various competitors in the Transcon Wars. We will look at an overall market analysis, schedules, passenger experience at the airport and in the air, and finally the mileage loyalty programs.

Market Analysis

** Please note: There may be a slight (1-2 percentage point) error in our analysis due to differing methods of assigning credit for multi-carrier itineraries.

It’s not hard to see why JFK-LAX and JFK-SFO are so important. JFK-LAX is the largest O&D airport pair in the United States, with 551,000 passengers traveling between the airports in each direction in the first quarter of 2013. The average fare paid by JFK-LAX customers (one-way) was $381.26, which translates to a yield of 15.4 cents, and in Q1, the combined round-trip market was worth $420.14 million in O&D revenue alone for US airlines, in addition to all of the revenues from connecting traffic that flow across the route.

JFK-SFO meanwhile, is the fourth largest O&D airport pair in the United States with 381,350 passengers traveling between the airports in each direction in the first quarter of 2013. The average fare paid by JFK-SFO customers (one-way) was $401.21, which translates to a yield of 15.5 cents. And in Q1 2013, the combined round-trip market was worth more than $306.0 million in O&D revenue for US airlines, plus additional connecting revenues.

And many of these customers are high yielding business travelers – the most profitable type for legacy carriers. Airchive found that 13.44% of JFK-LAX and 13.50% of JFK-SFO passengers paid more than $1000 round-trip for their tickets. Airchive also delved into the carrier specific market share and fare data for each of the routes.

However, a significant proportion of the passengers traversing the route did so on mileage tickets, so Airchive isolated the O&D data for paying customers only. About 8.1% of customers on the route were traveling on mileage tickets, so the fares displayed in the charts below reflect paying customers only. Looking first at JFK-LAX, the O&D market share leader was American with 27.2% of the market, followed by Delta with 22.7%. The other 3 carriers are all clustered around 15% market share.

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However, when one looks at average fares, it becomes apparent that United’s historical roots on the route still have a pay-off – it has the highest average one way fare paid of any carrier at $473.82, with American close behind at $463.75. Delta and Virgin America both have average fares in the $330-$350 range, and JetBlue brings up the rear with a surprisingly low one-way fare of $231.90.

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On JFK-SFO, surprisingly the market share leader is beleaguered LCC Virgin America, who slots in just ahead of United with a 21.3% O&D market share. United, Delta, and American are all clustered not far behind, with 21.2%, 21.1%, and 20.3% O&D market share respectively. JetBlue again brings up the rear with 12.8% of the market.

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The average fare data, however, tells a similar story to JFK-LAX, with United and American having the highest fares, Delta and Virgin America converging at around $350, and JetBlue bringing up the rear at $234.70. United in particular has an average one-way fare of $607.03, or a 51.7% premium over the market average!

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Turning to the composition of the traffic on the routes, high yield traffic on JFK-LAX, the larger market of the two, is driven heavily by the entertainment industry; Hollywood films, television, and movies. The movie studios all have a deal with the actor’s union that requires the studio to fly actors in at least business class when flying them between Los Angeles and New York (and vice versa). The deal actually used to require First Class in the 3-class First Class cabin, which explains the existence of First Class for United p.s. and American on the route. For the remainder of the traffic, there are strong general business ties between the two markets as well; the two largest economies by metropolitan area Gross Domestic Product (GDP) in the US, and 2 of the 3 largest in the world, and thus lots of corporate contracts to be had. On the leisure side, this route skews more towards tourists as both ends are important tourist destinations.

JFK-SFO’s high yield traffic component is really driven by two main sectors – tech and finance. The San Francisco metro area, through Silicon Valley, is the world’s largest tech hub, while on the East Coast, NYC is fast growing into a hotbed for tech startups like Ideeli.com. Additionally, new and existing Silicon Valley tech businesses typically finance expansion through venture capital (VC) and/or credit from New York City based banks and VC firms. Tying into that market, New York is the world’s largest finance and banking center, while San Francisco is the banking hub of the Western US (and the third largest banking center in the US after New York and Charlotte) driving additional high yield traffic. On the leisure side, traffic is more balanced between visiting family relatives (VFR) traffic and tourist traffic, though San Francisco is certainly an important tourist destination in its own right – it’s nowhere near as big as Los Angeles in this regard.

Passenger Experience & Convenience

The five carriers currently competing on JFK-LAX and JFK-SFO are legacy carriers United, Delta, American as well as hybrid discount carriers Virgin America and JetBlue Airways. All 5 airlines offer economy class, premium economy, and a premium cabin, while American Airlines offers an exclusive First Class cabin configured with international style open suites, in addition to a business class product with flatbed seats. All 5 carriers will operate primarily single aisle, narrow-body aircraft on the route (Airbus A321s for JetBlue and American, Boeing 757-200s for United and Delta, and Airbus A319s and A320s for Virgin America), although Delta will retain a few internationally configured Boeing 767-300ER on the route(s) until re-configuration of their 757-200 fleet is complete. Delta’s 767-300ERs on the route feature the same premium cabin product as the 757-200s, but the audio video on demand (AVOD) in-seat entertainment system has different content.

Dated cabin like this First Class cabin on American Airlines current Boeing 767-200 are quickly becoming a thing of the past. (Credits: Chris Sloan)

The enhanced products are available from all 5 carriers on JFK-LAX and JFK-SFO, while Delta Air Lines also offers similar product on its up to 5 daily flights between New York JFK and (one of) its Trans-Pacific gateway(s) at Seattle. Additionally, JetBlue is reportedly evaluating whether to add the product on select transcon routes from its other hubs at Fort Lauderdale and Boston, and American has, at times in the past, operated their current flagship 767-200ER product on Boston-Los Angeles.

The following is a product vs. product breakdown of the 5 competing products on the routes, beginning with the schedules.

Schedules

The following graphics give an overview of the 5 competing schedules for the current month (August 2013). The schedules have been overlayed time-wise to show the gaps, or lack thereof, in each carrier’s schedule.

JFK-LAX competitive overview. (Credits: Author)

JFK-SFO Competitive Overview. (Credits: Author)

As the three graphics show, American has far and away the best current schedule offering on JFK-LAX. Additionally, in May of this year, American’s Chief Commercial Officer Virasb Vahidi was quoted in a report by the Associated Press as saying that after the introduction of the A321s onto the JFK-LAX route in early 2014, American would be “effectively creating a shuttle service between New York and Los Angeles,” and increasing frequency on the route to the “low teens.” While New York JFK is currently a slot-restricted airport, those slot restrictions only exist at certain times of the day (known as peak periods), so it should be relatively easy for American to “fill in the gaps” and up its frequency to 13 or 14 flights by adding flights during the less busy mid-morning and mid-afternoon periods. While time-zone realities mean that American will operate less than hourly on the eastbound flights (there is a roughly a four hour block in the evening at LAX during which eastbound transcons cannot be scheduled as they would land at JFK in the early morning [between 1-5 am]), it will certainly maintain its market leadership on the route with the expanded schedule.

Delta and United appear to be roughly at parity on the route, with Delta actually having one extra daily departure. While this is somewhat ironic given that United is one of just two carriers to have operated JFK-LAX with the premium product since 2003, Delta has a hub on both ends of the route (especially after its recent build up in Los Angeles) so the extra frequency is justified by the connecting opportunities on either end. JetBlue currently has the weakest schedule of the 5, however the carrier has said that it will increase frequency on both JFK-LAX and JFK-SFO when it take delivery of its dedicated subfleet of 11 premium configured A321s, as the current schedule only requires 7 frames to operate (see below). On JFK-LAX adding mid-afternoon and evening departures (at roughly 2:30 and 6 pm) would make JetBlue’s schedule highly competitive, while on the return LAX-JFK adding mid-morning and late-night redeye departures (at roughly 9:30 am and 11:30 pm) would also boost competitiveness. Virgin America has a reasonably competitive schedule, but it has limited scope to expand its slot holdings at New York JFK.

On SFO-JFK, United has the best schedule, with Delta coming in close behind. This is unsurprising given that United has the largest US carrier Asian gateway at San Francisco, and thus can supplement origin and destination (O&D) demand on this route with connecting traffic. Meanwhile, American actually has a relatively weak offering of just 4 daily flights this month, though this too is scheduled to increase with the introduction of the A321s next year. On the JetBlue front, its 3 daily flights are the weakest offering in the market – we expect that to be increased by 2-3 peak day frequencies as well. Virgin America’s schedule is more competitive by default on SFO-JFK than on LAX-JFK, even though both routes have the same frequency from Virgin America, because there are fewer JFK-SFO flights as a whole.

Airport Services – JFK

At JFK Airport, JetBlue operates from the nicest terminal; its recently built Terminal 5, which opened in 2008 and features “free Wi-Fi throughout the terminal, grandstand seating under a 40-foot-diameter digital ring of LCD monitors in the Marketplace, spacious gate areas with ample seating, expansive windows that bring in natural light and offer unparalleled runway views, a children’s play space, and a lounge-like area in the East Concourse filled with whimsical and colorful furniture by Italian designer Moroso.” Terminal 5 has won rave reviews for the open spaces mentioned, and for its overall design, featuring the widest range of concessions of any domestic terminal at JFK.

Delta comes in close behind, as all of its JFK transcon flights are scheduled to operate from its new Terminal 4 facility, which was opened in May of this year. Terminal 4 has a revamped check in area, new retail and dining options, and enhanced decor – it was built by Delta at a cost of $1.4 billion. American also operates from one of the nicer facilities at JFK’s Terminal 8, which was built new between 1999-2007, while United operates from the older and more cramped Terminal 7. Virgin America operates from the non-Delta half of Terminal 4, another crowded space.

Inside Delta’s new Terminal 4:

Moving to specific ground services for premium passengers, American has its Flagship Check In service for First Class Passengers, as well as Concierge Key members and folks who purchase American’s premium Five Star ground services. American also offers premium check in counters and security lines for business class passengers – Airchive recently trialed these ground services.

American Airlines spacious Terminal 8 at JFK opened in 2007. (Credits: Chris Sloan)

Delta does not have a flagship check in service at Terminal 4, but they do have a new 38,000 square foot SkyPriority check in area with kiosks and manned counters. United has premier access in Terminal 7, as does Virgin America in Terminal 4. JetBlue for the moment doesn’t have a premium check in experience in Terminal 5, but it has yet to release details about the ground experience for its transcon premium offering – however, we can assume that JetBlue will at least match Virgin America’s check in offering.

The new check-in area at Delta’s expanded Terminal 4. (Credits: Chris Sloan)

Now for the most important part of the ground experience… the lounge. American has a Flagship First Class Lounge available to first class passengers on the route. American’s Flagship Lounges are very nice (Airways recently experienced the London Heathrow Flagship Lounge and came away very impressed). The Flagship Lounge is located within the new Concourse B Admirals Club and offers the following services and amenities:

Complimentary lounge buffet complete with china and silverware providing distinctive food offerings throughout the day

United also has a International First Class Lounge at JFK Airport which is available to Global Services Members traveling in BusinessFirst on the trans-con route. The International First Lounge for United is not as nice as American’s Flagship Lounge, and offers the following amenities and services:

Delta’s SkyClub does not offer the same level of free premium food and alcohol options as the First Class lounges of United and American (though the paid options do match up), but it is still the crown jewel of Delta’s Terminal 4 project thanks to the fantastic new SkyDeck, a 2,000-square-foot outdoor rooftop terrace with amazing views of the runway and the tarmac. SkyClub (and by extension SkyDeck) access is available for all business class passengers traveling in the BusinessElite cabin and those traveling on full fare economy class tickets with booking code Y (which, when bought at the last minute, are often pricier than discounted BusinessElite tickets).

(Credits: Author)

(Credits: Author)

United and American offer business class passengers traveling on the route access to their business class lounges as well (The United Club in Terminal 7 and the 2 Admirals Clubs in Terminal 8). Both facilities are nice enough, though the United Club is a bit small and doesn’t feature shower facilities. Over in Terminal 5, JetBlue has its pay-per use Airspace Lounge, featuring free alcoholic beverages, complimentary food and drink, free WiFi, power outlets at every seat, showers, and access to desktops and MacBooks. One can only imagine that passengers traveling in the new JetBlue premium cabin will get free access to the lounge, though that might lead to crowing in the lounge at peak travel times.

JetBlue Airspace Lounge at JFK Terminal 5. (Credits: Author)

Virgin America passengers traveling in First Class and Main Cabin Select currently lack lounge access, but are allowed to purchase, for a reasonably hefty fee of $75 dollars per person, access to the Virgin Atlantic Clubhouse, generally considered one of the world’s nicest business class lounges.

Airport Services – LAX

All 5 carriers operate from older terminals at LAX, though American will have 4 gates in the newly expanded Tom Bradley International Terminal (TBIT) when construction there is completed. American recently refurbished its Terminal 4 facility, re-doing the gates and expanding the check in area. United has no immediate plans to renovate its facilities at LAX, but it operates at 3 terminals; 6,7, and 8. Delta, who also shares part of Terminal 6 with United and Alaska Airlines, broke ground in April on a $229 million renovation of its Terminal 5 at LAX, featuring “new baggage carousels; upgraded facilities to improve international baggage recheck; and 15 new restaurants and shops (as part of a phased opening).” Virgin America and JetBlue operate from the older Terminal 3 facility – which has the least amenities of any of LAX’s terminals.

Like at JFK, American offers Flagship Check In at LAX (read Cranky Flier’s review of LAX flagship check in here) – it recently updated its first class check in facilities to increase separation from economy and business class passengers. However, United does not offer a comparable dedicated check in area for its Global Services passengers, though it does have Premier Access check in and a dedicated security checkpoint. As part of its Terminal 5 renovation, Delta is also offering a cordoned off SkyPriority check in area with its own dedicated security checkpoint.

nited’s LAX facilities, save for changes to the new branding, have remained relatively the same since a 1999 renovation. (Credits: Chris Sloan)

Both Virgin America and JetBlue have standard check in areas at Terminal 3, though Virgin America has a priority check in line, and one can only assume that JetBlue will match.

American has a Flagship Lounge at LAX Airport that features the same amenities as the one at JFK as well as individual Bose music stations for passengers. United Global Services passengers traveling in business class can access the International First Class Lounge located in Terminal 7, which offers similar services to the IFCL at JFK Airport, with the addition of a server to handle drink orders, warm food made to order, and fabulous views of the runway and tarmac. United also offers a United Club in Terminals 6 and 7 (neither with showers), while American has a standard Admirals in Terminal 4 (with showers).

American Airlines Admirals Club at LAX Terminal 4.(Credits: Chris Sloan)

Delta is renovating its Terminal 5 SkyClub to include a full service bar and updated branding, and it also features showers. Virgin America has its only dedicated lounge, The Loft, at LAX. Virgin America passengers are required to pay $40 for access to the Loft, which comes with complimentary food, cocktails, and WiFi. JetBlue currently does not offer lounge access to passengers at LAX.

Airport Services – SFO

At San Francisco United operates primarily from Terminal 3 and the G concourse in the international terminal, which are both nice and airy facilities, though they are increasingly crowded with United’s growing SFO operation. American and Virgin America operate from the newly built Terminal 2 facility – considered one of the nicest domestic terminals in the US. Terminal 2 features “more than 350 power outlets for laptop-tethered business travelers, art exhibits with cellphone-accessible narrations of the works by guides, a play area for children, and even ‘hydration stations,’ where travelers can fill water bottles for free before making their way to gates.” (Take an interactive tour of SFO Terminal 2 here). Delta and JetBlue both operate from the older Terminal 1 facility.

San Francisco Airport Terminal 2Designer: Gensler.

United takes the cake here, with its dedicated and exclusive Global Services check in room for Global Services Passengers traveling in business class. American does not offer a Flagship Check in area, but it does offer a dedicated First Class check in area and customers can still purchase the Five Star Service for a $200 fee. Delta and Virgin America offer standard SkyPriority and Priority check in areas respectively, while JetBlue offers no special check in (though one assumes that JetBlue will create dedicated priority check in lines when the premium product launches at all 3 airports involved).

United has an International First Class Lounge at SFO and it is typically considered the nicest First Class lounge in United’s system with similar services and amenities as the one at LAX, but more spacious with better decor. United also offers a pair of United Clubs (in Terminal 3 and the International Terminal – again no showers), while American offers an Admirals Club with showers in Terminal 2. Virgin America offers its passengers access to the Virgin Atlantic Clubhouse for $75 under the same guidelines as JFK, though the facility isn’t as nice. JetBlue currently has no lounge offering at SFO.

First Class Hard Product

By default American has the best product in all of these first class categories as United is eliminating its First Class product on the route in favor of additional BusinessFirst seats. United used to operate a true 3-class operation on its Premium Service (p.s.) transon product with First Class, Business Class, and EconomyPlus on a specially configured subfleet of Boeing 757-200 aircraft seating 110 (12F/26C/72Y+). However, early in 2013, United announced that it would be eliminating first class from its 15 p.s. 757 aircraft, and replacing the lie-flat business class product with its BusinessFirst product featuring flatbeds. Currently, 4 of the United 757-200s have finished re-configuration into the 142 seat, 3-class configuration (28J/48Y+/66Y). In the interim, the former First Class seats are being sold on the transcon routes as business class seats which are offered first to United Elites traveling on these flights, and then on a first-come-first-serve basis to remaining passengers.

American currently operates 12 dedicated 3 class Boeing 767-200ER aircraft configured with 168 seats (10F/30C/128Y) on transcon routes with Flagship First Class seats (non-suite). However, the carrier’s new Airbus A321 Transcontinental product (designated as A321T) will feature an updated First Class product with 10 open suites amongst its 102 seat, 4 class configuration (10F/20J/36Y+/36Y). American’s new First Class suites will feature fully flat beds in 5 rows of a 1-1 configuration, offering every customer direct aisle access. The beds will be 82 inches long (6 feet 10 inches), and offer 62 inches of seat pitch with a seat width of 21 inches. According to American, “customers can individually adjust any component of the fully lie-flat seat, designed by Sicma, including the seat back, head rest and leg rest. The seats feature a large tray table and work surface and an individual storage unit for stowing personal items.” The seats also feature individual 110V universal AC power outlets and USB individually at every seat.

American Airlines First Class Cabins on their new Airbus A321T will be the only true remaining first class product in the transcontinental market. It launches on January 7, 2014. (Credits: American Airlines)

First Class Soft Product

American currently offers an up to 5-course meal (antipasto, starter, salad, main, dessert) on its transcon flights along with an extensive list of premium wines and spirits. Service in premium cabins, as with all US carriers can be hit or miss, though the premium transcon services (on average) tend to win better reviews than most other domestic routes. American also offers its first class passengers Bose® QuietComfort® 15 Acoustic Noise Cancelling® headsets, the same ones used for American’s international premium class passengers.

Business Class Hard Product

This is where the real war kicks in. All 5 carriers will be offering a true business class product on the route – 4 with flatbeds (all except Virgin America). Starting with the new kid on the block, JetBlue’s new premium cabin will feature 16 business class seats as part of their 159 seat, 3-class configuration (16J/41Y+/102Y)) on an initial sub-fleet of 11 premium configured Airbus A321s. The business class cabin will feature 16 staggered business class seats in 5 rows. Rows 1,3, and 5 will be configured 2-2, while rows 2 and 4 will be configured 1-1. All 16 seats are configured with 80 inch (6 feet 8 inches) flat beds, and the 4 seats in the 1-1 rows also feature a sliding door for additional privacy – dubbed “mini-suites.” The seats will include “air cushions with adjustable firmness,” and “a massage function,” as well as 2 110V power outlets and 2 USB ports and a fully adjustable personal LED reading light.

American will also feature a full flatbed product in its 20 seat business cabin in 5 rows of a 2-2 configuration. The new seats, designed by BE, will feature flatbeds of between 75-78 inches (6 feet 3 and 5 inches), with 58 inches of seat pitch, and seat width of between 18.5-19.5 inches. The seats will also feature 110V power outlets and USB ports. The flat-bed seats replace the existing recliner business class seats in the 767. Airchive will be on the inaugural flight on January 7, 2014.

American Airlines new Transcontinental Business Class will debut on the Airbus A321 on January 7, 2014. (Credits: American Airlines)

The current, and soon to end, Business Cabin on American’s Boeing 767-200 fleet. (Credits: Chris Sloan)

Delta also revamped the BusinessElite product it will be offering on board its fleet of Boeing 757-200s configured in a 3 class, 168 seat configuration (16J/44Y+/108Y). The 16 seats in the BusinessElite cabin are configured in 4 rows of 2-2 seating. The fully flat bed seats are staggered and slightly angled, with a length of 76 inches (6 feet 4 inches) with a seat with of between 20.2-22.2 inches. The cabin as a whole features a full-spectrum LED cabin mood lighting system, and new lavatories with LED lighting and touchless flush.

Delta’s just announced new Transcontinental BusinessElite Cabin will launch sometime in 2014. (Credits: Delta Air Lines)

(Credits: Delta Air Lines)

United’s new 28 seat BusinessFirst cabin is configured with 7 rows in a 2-2 configuration with the same seat as its international BusinessFirst cabin. The flatbed has a length of 76 inches (6 feet 4 inches) with a seat width of 28 inches. The seats also feature enhanced storage spaces, 110V power outlets, and a USB port.

United Business First Flatbed. (Credits: United Airlines)

Virgin America, long the standout in the market, is the only carrier that doesn’t offer a fully flat bed on the routing, with 8 seats in its First Class cabin offering 55 inches of seat pitch and a seat width of 21 inches. The seats also feature 110V power outlets and USB ports, and the cabin is outfitted with mood lighting.

Virgin America First Class seats offer 55 inches of pitch and 28″ wide, in a standard 2 X 2 configuration. The 55 inch pitch was highly unusual for a narrow-body domestic airliner and only recently are the legacy domestic airlines attempting to catch up with this offering, yet mainly on transcontinental flights. Virgin America offers this level of 8-seat First Class exclusivity on all of its flights and aircraft. VX’s high-end standout product is now under assault. (Credits: Virgin America)

Business Class Soft Product

United, American, and Delta all offer passengers very similar 4 course meals with starters, appetizers, 3 choices of mains, and dessert/cheese, as well as strong wine selections (though United supposedly has the best wine offering). None of the three offer passengers amenity kits except Delta. Service again, is hit or miss, as it always is with US legacy carriers. American passengers receive Bose® QuietComfort® 15 Acoustic Noise Cancelling® headsets, while United and Delta give out standard headsets that are dubbed as noise cancelling.

American Airlines new Business Class meal service includes the ability to pre-order from the menu prior to the flight. (Credits: Chris Sloan)

Virgin America also offers a full meal service on the route. While JetBlue has no current free meal offering on the route, we can only assume that JetBlue will at the very least offer its premium cabin passengers free meals from the 5 fresh options that the airline recently rolled out on a trial basis (in addition to the existing free snacks). Both airlines offer complimentary headsets. Most importantly, both airlines are noted for their hip, friendly and excellent customer service on board.

In-Flight Entertainment and Connectivity

In premium cabins, American Airlines passengers will have access to in-seat entertainment via a 15.4 inch HD capable touchscreen monitor with “up to 75 movies, more than 150 TV programs, more than 350 audio selections and up to 15 games all free, as well as seat-to-seat chat; live text news and weather updates, 3-D moving maps, airport maps, connecting gate information, and more. In the Main Cabin and in Main Cabin Extra, passengers will have access to in-seat entertainment via an 8.9 inch HD capable touchscreen monitor with “an assortment of movies, TV programs, games and audio selections.” The aircraft will also offer WiFi via Gogo.

American Airlines new Panasonic eX2 IFE, first introduced on its new 777-300ERs. (Credits: Chris Sloan)

United customers in BusinessFirst will have access to in-seat entertainment via a 15.4 inch HD screen with audio video on demand (AVOD), games and a flight map. Economy Class and Economy Plus passengers will have a 9 inch in-seat screen with the same AVOD entertainment options as BusinessFirst passengers. Passengers will also have access to Gogo® Inflight Internet service.

Delta BusinessElite passengers will have in-seat 16 inch Elite Integrated Smart Monitors with 18 channels of live satellite TV, 350 films, 130 hours of stored TV, 95 hours of premium programming from HBO & Showtime, 5,000 digital songs, 27 games, and a moving map. Economy Class and Economy Comfort passengers will have 9 inch Eco 9i Integrated Smart Monitors with the same entertainment options as BusinessElite. However, some of the content in the IFE system requires payment from customers. GoGo in flight internet will also be offered.

JetBlue’s customers in the new premium cabin will have 15 inch HD screens in seat with 100 channels of DirectTV programming (no AVOD though). Economy class customers will have a 10.1 inch in-seat IFE screen with 100 channels of DirectTV (again no AVOD). The carrier is also working to launch its Fly-Fi on-board WiFi system, which it claims is faster than GoGo.

Virgin America offers its award winning Red IFE system in both First Class and Main Cabin/Main Cabin Select, featuring a 9 inch in seat IFE screen with “complimentary personal on-demand entertainment offering hundreds of movies, television shows, music and games,” as well as Go-Go WiFi on board.

Virgin America is especially known for its cutting edge innovation in inflight-entertainment systems. While other carriers are just now introducing advanced seat-back IFE’s on domestic U.S. Flights, every Virgin America seat has had this since the airline’s 2007 launch. Their system, known as RED leaped frogged jetBlue’s pioneering LiveTV system which is only now in the midst of its first upgrade since the airline’s 2000 launch. On May 21, 2009, Virgin America became the first U.S. airline to offer Wi-Fi access via Gogo Inflight Internet on every flight. VX’s Panasonic Avionics’ IFE’s are already being updated to their 3rd version in 2013. (Credits: Virgin America)

Economy Class and Premium Economy

While these are not the most important part of the offering in the Transcon Wars, the economy class cabins are all nice enough, with JetBlue and American introducing new cabins in 2014. All 5 carriers offer between 31-33 inches of seat pitch – Delta and United are at 31, American is 31-32, Virgin America is 32, and JetBlue is 33 – in virtually identical 3-3 layouts. JetBlue offers one free checked bag to all economy class passengers, that service is only available to Elites at the other 4 carriers.

American’s new A321s in Main Cabin and Main Cabin Extra feature seatback IFEs at every seat. (Credits: American Airlines)

In premium economy, American offers 35-37 inches of seat pitch, Delta offers 35, United offers 36, JetBlue offers 37, and Virgin America offers 38 (though it has by far the smallest cabin at 12 seats). All of the cabins are configured in identical 3-3 configurations, but Delta offers free drinks and snacks to Economy Comfort Passengers, while Virgin America offers the same with free IFE as well. Virgin America and JetBlue both offer free checked bags to premium economy passengers.

Frequent Flyer Programs

United, Delta, and American all offer similar frequent flyer programs (MileagePlus, SkyMiles, and AAdvantage) with varying levels of elite status. Upper tier elite status in each of these programs also confers elite status in the corresponding global alliances (Star Alliance, SkyTeam, and oneworld). United and Delta both will switch to revenue based elite status qualification for their frequent flyer programs in 2014, and American is expected to eventually follow suit. But for the serious frequent flyer on the route, meeting these minimum spending requirements isn’t difficult.

From an award mile earning perspective, United and American offer similarly expansive mile-earning opportunities (generally considered the two best frequent flyer programs from an earning and spending miles framework), while Delta is more restrictive with mileage earning on partner airlines. On the redemption front, United and American offer similarly strong programs, while Delta Sky Miles are notoriously difficult to redeem for award tickets. All 3 have frequent flyer programs that can get you to hundreds of cities around the world through the alliances – Star Alliance has the widest reach, oneworld the narrowest. Virgin America Elevate is revenue based for earning miles on Virgin America proper, though they do have redemption options for Virgin Atlantic, Virgin Australia, and Hawaiian Airlines. JetBlue’s True Blue has more widespread redemption options, but is also revenue based for earning points.

On the upgrades front, United offers the most seats, but is more restrictive with who can upgrade versus Delta and American, even for top-tier elites. Neither Virgin America nor JetBlue offer complimentary upgrades.

Aircraft

The Boeing 757s and Airbus A321s used by Delta/United and American/JetBlue respectively are direct competitors by size, while Virgin America’s A319 are a smaller sister aircraft to the A321s. Virgin America eventually plans to transition its transcon routes to the larger A320, which represents 81.1% of its 53 frame strong fleet after enough A320s with sharklets are delivered, replacing the oddball sub-fleet of A319s.

In March 2013, Virgin America became the second airline in the US to introduce fuel saving Sharklets following JetBlue. (Credits: JetBlue)

The 757 can carry about 40,000 pounds more payload than the A321, so its cumulative revenue generation potential is greater than that of the A321, even with an equal number of seats and passengers thanks to cargo. On an operating cost per aircraft mile basis, the A321 has roughly a 13% cost advantage over the 757s thanks to its much lower fuel burn and maintenance costs. However, the 757 has lower ownership costs (leasing/financing), which makes the cost gap relatively narrow. Moreover, given the high-yield composition of the route, operating costs are not necessarily the most important factor.

Delta Boeing 767-300 at the carrier’s new JFK Terminal. DL will still run some 763s on the transcon. (Credits_ Author)

Strategic Implications

For each of the 5 carriers on the route, JFK-LAX/SFO have importance far beyond the routes themselves. Starting with Delta, United, and American – all three carriers are competing heavily for highly lucrative corporate contracts for nationwide travel – winning business on JFK-LAX can drive millions of dollars in additional incremental business and drive the brand. Thus we can think of JFK-LAX/SFO as watershed markets for a much large prize; a significant chunk of the high yield business travel within the US. As Delta senior vice president for New York Gail Grimmett puts it, “The transcon market is incredibly important because it helps you become the preferred carrier across the board,”

Looking carrier by carrier, for American, the new A321T represents the hallmark and the flagship of American’s new premium customer and cabin experience. While these plans are subject to change due to American’s impending merger with Tempe-based US Airways, the fantastic plans for the A321T product have trickled down into the passenger experience plans for the new North American fleet of standard A319s and A321s, as well as the next batch of Boeing 737-800s being delivered from the second half of this year onwards. American also wants to use the route to maintain its historical edge in corporate contracts with companies that have major bases in New York and Los Angeles.

American Airlines Terminal 8 at JFK. (Credits: Chris Sloan)

For United, the investment in the new product is mainly to consolidate its gains and existing strengths. United already has the highest or second highest fare premium on the routes, and is the largest airline in both the NYC and San Francisco markets, and the third largest in the Los Angeles market. Maintaining that revenue premium and those scale advantages is the primary strategic importance for United.

JFK’s United AIrlines Terminal 7 was built in the 1970s and is oddly shared with British Airways. (Credits: Chris Sloan)

For Delta, the Transcon Wars are a critical cog in the contrarian network strategy that has been pursued by the carrier over the past 4 years. Delta’s core areas of strength from a network perspective are in the Midwest (the nation’s heartland) and the Southeast, and it does very well with winning corporate contracts in these areas. However, a significant proportion of corporate contracts in the country are driven by New York, LA, and San Francisco – in particular, the transcon routes out of these airports. By and large, Delta sees JFK-LAX/SFO as galvanizing markets – markets in which Delta feels that if they can win over a large share of business travelers, then they will get a much larger bounty of high yield traffic across the country through new corporate contracts. JFK-LAX/SFO are also key cogs in Delta’s broader “Win New York” strategy, which has gradually emerged as a key driving force in the airline in the past five to six years. In the early to mid-2000s, Delta slowly built up JFK airport, first as a major trans-Atlantic gateway, and then more broadly as a hub in the Northeast US. It was during this period that Delta made its first investments into placing internationally configured widebodies and 757s onto JFK-SFO/LAX, as well as in offering enhanced products on longer routes from JFK (even on domestically configured aircraft, non-LAX/SFO transcon passengers flying to and from JFK get free snacks/drinks in economy comfort and lounge access in premium classes. The strategic plan really began to take off after the 2011 slot swap with US Airways that pushed Delta to become the single largest slot holder at La Guardia Airport, the primary airport for short haul business travel in the NYC area. Delta upgraded its terminal facilities at La Guardia as that operation evolved into a true connecting complex post-slot swap, and also invested $1.4 billion to upgrade and extend half of Terminal 4. LAX has also grown in importance for Delta in the past 2 years. From an operational trough of just around 90 daily flights, Delta has grown over the past 3 years to nearly 120 daily departures this summer, serving 38 destinations, and upgrading all flights to include first class (eliminating 50 seat jets). Most recently, in early August, Delta announced that it would be bringing its premium short haul product, the Delta Shuttle, currently seen on routes between the New York La Guardia, Boston, Washington Reagan triangle and on La Guardia – Chicago O’hare, to Los Angeles – San Francisco as an hourly service. The investment in the new BusinessElite premium offering only reinforces Delta’s growth in LA. While Delta has built up LA multiple times before over the past decade (drawing the operation back down in every case), it has never done so operating from a position of financial strength as it is today.

Delta’s “Oasis at Terminal 5” at LAX, first built in 1988 is being massively renovated as DL dramatically scales up operations. (Credits: Chris Sloan)

JetBlue has perhaps the most riding on the Transcon Wars out of any of the carriers on the route. JetBlue is dealing with a rising cost base thanks to an aging workforce (increased salaries through raises plus increased benefit costs), an aging fleet of Airbus A320 and Embraer E190s (which is driving up maintenance), and slowing domestic growth (meaning that rising fixed costs cannot be spread across as many flights). Over the past 10 years, JetBlue has slowly evolved its business model from a purely leisure-focused no-frills carrier, to a hybrid carrier focused on grabbing an increasing mix of higher yield business travel as well. The logical evolution for JetBlue, in order to grow revenues to offset rising costs, is to expand into a true premium product. However, instead of taking incremental steps like adding a better premium economy product or the equivalent of a domestic first class, JetBlue made a bold bet on premium products being a significant part of its future and went all in on what looks to be a world class flatbed business class product. Now JetBlue will not necessarily be targeting corporate contract traffic on the route, but more premium traffic from small business. As JetBlue CEO David Barger puts it, “There’s absolutely no reason to rip off the customer in a premium class. It’s not necessary to charge what our competitors do. We’ll have premium fares that appeal to small corporations, independent business travelers and even upscale leisure customers.” Paradoxically, thanks to the bulk discounts that are often negotiated in such corporate contracts, small business travelers can often be higher yielding than corporate ones. And for JetBlue, success on JFK-LAX/SFO can be a gateway to an expanded premium offering on transcon routes – not only more destinations out of JFK, but also a few out of Boston (especially to San Francisco/Seattle) and Fort Lauderdale (perhaps LA). While these routes are all lower yielding than JFK-LAX/SFO, JetBlue’s lower cost base versus legacy carriers could still make the route work. More importantly, the new premium product can be very useful for JetBlue in the latter half of the decade if and when it expands from Fort Lauderdale into deeper South America using Airbus A321neos.

JetBlue’s Terminal 5 at JFK. (Credits: Chris Sloan)

For Virgin America, the route plays somewhat of a lesser role. It is clearly an important route for Virgin America, but contextually, Virgin America has not invested in any sort of specialized product offering specifically for JFK. More generally, Virgin America is hemorrhaging money, though it finally reported its first quarterly profit in Q2. And it is unclear whether Virgin America can afford to invest in upgrading its product to truly compete.

Vigin America’s #2 largest airport is LAX, in terms of traffic.(Credits: Chris Sloan)

How will things play out?

There are those who believe that the massive investment in new flatbed premium products is a bit of overkill; that it simply amounts to a bunch of wasted money and effort. That is not necessarily our view. Directly speaking, JFK-LAX/SFO are currently profitable markets that will perhaps see decreased fares, especially in premium cabins. This small scale fare war may impact the direct profitability for carriers on the route. But the importance of these routes goes beyond direct profits. Whether its consolidating existing market strength (United, Virgin America, and American), trying to win new business (Delta), or making a bold bet on a new business model (JetBlue) – the strategic importance of these routes means that the investments aren’t necessarily overkill. For Delta and United, if the re-configured 757s can be rotated onto trans-Atlantic flights from the Northeast, then that will likely lessen the direct impact of the capital expense (though from a fleet rotation perspective it may be difficult for United to do so).

But more generally, even with a premium cabin fare war, one can easily envision a so-called Race to the Top – in which the 5 players on the route enter into an arms race of continually upping the services offered to premium passengers – think First Class lounge and Flagship Check In access for business class customers. Looking carrier by carrier – United, Delta, and American are all in on the route for the long haul due to the importance of corporate contracts